Managing strategic vendors
versus long-tail vendors

Why it’s not an either/or proposition

Strategic vendors vs. long-tail vendors

While the potential for cost savings in strategic vendor contracts is substantial, actively managing these contracts may not yield as high a percentage of savings when compared to total spending. Conversely, it might appear that there is little room for improvement in low-value contracts – but their neglect could mean there is significant savings potential. This, in turn, could lead to substantial aggregate savings across numerous vendors.

Ultimately, this isn’t an either/or proposition; it’s a matter of where to begin.

Given the size and scale of your mega-vendor contracts, it’s a given that most attention be paid to them. But properly optimizing them requires complex licensing expertise and negotiating experience to ensure you’re looking at the most efficient licensing options, the right contractual terms and conditions, and the best possible price.

Managing the long tail is no less important, but unfortunately, it is too often neglected because of the sheer volume of vendors involved. Much of the work needed to manage tail spend is tedious and often complex, requiring specialized knowledge of smaller vendors’ contracts.

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“According to 2023 research, more than 70% of leaders felt that tail spend management tools have either exceeded or met their expectations, leading to benefits such as reduced cycle times and driving spend to more sustainable or approved vendors.”

Source: The Hackett Group

Getting started

Leave long-tail vendor management to the experts.

An experienced partner will have industry-specific knowledge, offer alternative critical products for your business, and dedicate time and resources to ensure you get the right contract terms and conditions at the right price. With customer relationships dating back to 1989, SHI’s licensing team does this day in and day out.

Work with experts to optimize strategic contracts.

SHI provides strategic license advisory for more than 40 partners, giving you dedicated subject matter expertise for each respective partner’s programs, products, policies, and processes. We’ll help you identify and select the volume licensing programs for over 150 additional partners and many smaller, niche vendors.

ESG's growing financial impact

Intersection of sustainability and software cost optimization

Sustainability has become crucial in financial strategy, highlighted by McKinsey's finding that strong ESG performance boosts financial outcomes. Finance teams are increasingly managing environmental, social, and governance factors, with a focus on integrating sustainability into software cost optimization to balance economic and ESG goals. This includes carbon accounting and optimizing software use to minimize environmental impact, particularly in reducing data center emissions.

Efficient software usage and cloud services contribute to sustainability by lowering energy consumption and reducing electronic waste, extending device lifespans.

“50% of organizations will adopt sustainability-enabled monitoring by 2026, to manage energy consumption and carbon footprint metrics for their hybrid cloud environments, according to Gartner, Inc. This is in response to pressure from investors, customers, regulators, and governments, which is forcing organizations to adopt carbon neutrality and net zero goals by 2030.”²

Adopting sustainable software management practices not only addresses regulatory demands and attracts investors but also cuts operational costs, creating long-term financial benefits.

As a Capgemini survey reported, a significant 52% of organizations anticipate increasing sustainability investments. This underscores the finance team's role in aligning software cost optimization with ESG strategy, demonstrating how sustainability and financial objectives are increasingly interconnected.

²Gartner Press Release, Gartner Predicts 50% of Organizations Will Manage Hybrid Cloud Energy Consumption with Sustainability Monitoring By 2026, May 21, 2024.